1st LD Writethru: Gold sharply up after Fed announcement

Gold futures on the COMEX division of the New York Mercantile Exchange rose on Thursday as traders digested the Fed's announcement from their Federal Open Market Committee meeting that ended after the market's close on Wednesday.

The most active gold contract for June delivery rose 16 U.S. dollars, or 1.28 percent, to settle at 1,266.40 dollars per ounce.

Gold was given support as no interest rate hike was announced for the U.S. economy during the April FOMC meeting. The U.S. central bank in a statement said that although the job market was showing strength, household spending has moderated, indicating that a rate hike was not an appropriate move for the April meeting.

Investors are currently hedging their bets as to when the U.S. Federal Reserve will hike its rates. Ever since March's FOMC meeting, traders believed that the Fed would raise rates from 0.50 to 0.75 during the July FOMC meeting, but now that the April meeting has come and gone, expectations are now for a rate hike in September. The CMEGroup's Fedwatch tool shows an implied probability of a 49 percent chance of a rate hike during September, and a 33 percent chance in July.

Analysts believe the goal of the Fed is to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy begins to recover. Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation.

The precious metal was given further support as the U.S. Dollar Index fell by 0.53 percent to 93.89 as of 17:05 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Gold was kept from rising further as a report released by the U.S. Department of Commerce showed the U.S. gross domestic product figure coming in at expectations of 0.5 percent gain. Analysts note strength in residential investment and weakness in the energy sector, both of which were as-expected.

Silver for July delivery added 25.3 cents, or 1.46 percent, to close at 17.588 dollars per ounce. Platinum for July delivery rose 25.3 dollars, or 2.47 percent, to close at 1,050.70 dollars per ounce. Enditem